2013 (9) TMI 378 - AT - Central Excise

Court allows Cenvat credit on deposit for appeal under Section 35F of Central Excise Act

The Appeals were allowed in favor of the Appellants. The court held that the deposit made under Section 35F of the Central Excise Act for hearing an ... Whether duty paid u/s 35F (as pre-deposit) is available as Cenvat Credit - Cenvat Credit of duty paid against the stay order by the assessee from the supplying unit of goods against supplementary invoice was availed at the receiver unit - demand of differential duty - Penalty u/s 11AC - The Appellants were manufacturers of non-ferrous metals and their by-products - Revenue was of the view that the cost arrived at was not proper and that a different cost construction method had to be adopted and that resulted in short levy of Central Excise duty - Held that:- The demand confirmed by the impugned order was not sustainable against the Appellants - There was no reason to deny the Cenvat credit for duty paid under Section 35F of Central Excise Act - In this matter the Revenue had not been able to show any loss of revenue or any unjust enrichment or any reasonable ground for denying such credit except that in some other context the Tribunal has observed in some cases that the deposit under Section 35F had a slightly different character than duty normally paid. HARINAGAR SUGAR MILLS LTD. Versus STATE OF BIHAR [2003 (11) TMI 524 - SUPREME COURT OF INDIA ] - The amount deposited had in fact been passed on to the factory which was receiving the goods and the Appellants were not claiming any refund of the deposit made under Section 35F - They were only on the limited point that as per Section 35F they were required to make deposit of duty for hearing of Appeal and what they have deposited was therefore towards duty liability they should be allowed to take credit of such duty paid - Decided in favour of Assessee. Issues:1. Calculation of Central Excise duty on concentrates.2. Disallowance of Cenvat credit on supplementary invoices.3. Interpretation of Section 35F of the Central Excise Act regarding pre-deposit of duty.Issue 1: Calculation of Central Excise duty on concentrates:The Appellants, engaged in manufacturing non-ferrous metals, faced disputes regarding the calculation of Central Excise duty on concentrates. They followed a cost construction method for duty payment based on consultations with the Department. However, the Department alleged improper cost calculation, leading to short levy of duty. The Appellants contested this, stating that the duty was paid as per agreed terms and no penalty was imposed for suppression.Issue 2: Disallowance of Cenvat credit on supplementary invoices:A Show Cause Notice was issued to the Appellants questioning the availed Cenvat credit on supplementary invoices related to a deposit made under an order by the Tribunal. The Department argued that such deposits did not qualify as duty payments, hence disallowing the credit. The Appellants contended that the credit was legitimate under Cenvat Credit Rules, emphasizing no mis-declaration or fraud.Issue 3: Interpretation of Section 35F of the Central Excise Act:The dispute revolved around whether the deposit made under Section 35F for hearing an Appeal constituted duty payment eligible for Cenvat credit. The Appellants argued that the deposit was towards duty liability and should be creditable. The Department cited Tribunal decisions stating that Section 35F deposits were not duty payments. The Appellants relied on a Supreme Court ruling affirming such deposits as part of the liability.The judgment analyzed precedents and the nature of the deposit under Section 35F. It differentiated between duty payments and deposits for appeals, emphasizing that the Appellants' deposit was akin to duty liability. Referring to relevant Tribunal and Supreme Court decisions, the judgment concluded that denying Cenvat credit for duty paid under Section 35F lacked grounds, noting the absence of revenue loss or unjust enrichment. Consequently, the Appeals were allowed, providing relief to the Appellants based on the specific circumstances and legal interpretations presented during the proceedings.